Part A Discount Flotation Cost Net proceeds from sale of bond Coupan payment Years to maturity par value

before tax cost of debt After tax cost of debt Part B Par Value Annual Dividend Annual Dividend Dollar Value Flotation cost Expected Selling Price Net Proceeds Cost of preferred stock Current Price of Common Stock Expected Cash dividend dividend growth rate Flotation Cost Selling Price of Common Stock Cost of retained earnings Cost of New Commmon Stock

$ $ $ $ $

20.00 20.00 960.00 65.00 10 1,000.00 7% 4.20 %

$ $ $ $ $

100.00 6% 6.00 4.00 102.00 98.00 6.12 % 35 3.25 5% 2 33 14.29% Part C 14.85% Part D

WACC with Retained Earnings/Investment <= $100000 Source of Capital Weight Cost of Capital Wr Debt 0.35 4.20 Preferred Stock 0.12 6.12 Common Stock Equity 0.53 14.29 WACC

1.47 0.73 7.57 9.78

WACC with New Stock/Investment >= $100000 Source of Capital Weight Cost of Capital Wr Debt 0.35 4.20 1.47 Preferred Stock 0.12 6.12 0.73 Common Stock Equity 0.53 14.85 7.87 WACC 10.07519